Michael Saylor's Strategy Establishes $1.44B USD Reserve While Revising FY2025 Bitcoin Earnings Guidance

Michael Saylor's company has formed a USD reserve of $1.44 billion, enhancing its role as the world's premier "Bitcoin Treasury Company." This reserve aims to support dividend payments and manage interest obligations, offering a financial buffer amid the volatile cryptocurrency market. In addition, the company updated its earnings outlook for FY2025 in light of recent Bitcoin price fluctuations.

Key Takeaways

The company established a USD reserve of $1.44 billion, reinforcing its balance sheet strategy.
The reserve supports dividends and interest obligations, providing liquidity during market volatility.
It currently possesses 650,000 Bitcoin, about 3.1% of total Bitcoin supply.
The updated FY2025 earnings guidance factors in Bitcoin's price variability, projecting potential losses and gains.
Market reactions, including criticism from notable Bitcoin skeptic Peter Schiff, highlight concerns about the company's financial model.

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Formation of the USD Reserve

Michael Saylor’s strategy has led to the creation of a substantial U.S. dollar reserve totaling $1.44 billion, which signifies an expansion of the company's balance sheet strategy, now positioning it as the largest "Bitcoin Treasury Company" globally.

This reserve is crucial for facilitating dividend payments on preferred stock and fulfilling interest obligations, thus providing a buffer for enhanced liquidity as the digital asset markets fluctuate.

The funding for this reserve was primarily sourced from ongoing at-the-market stock sales. The company's objective is to ensure cash flow coverage for at least 12 months concerning dividend obligations, with aspirations to extend this duration to 24 months or longer. The company retains the ability to adjust the reserve based on prevailing market conditions and capital requirements.

Michael Saylor, the Founder and Executive Chairman, said the USD Reserve represents a pivotal evolution for the company, augmenting its existing Bitcoin reserve. "We believe it will better position us to navigate short-term market volatility while delivering on our vision of being the world’s leading issuer of Digital Credit," he stated.

According to CEO Phong Le, the company now holds 650,000 Bitcoin, which constitutes approximately 3.1% of the total eventual supply. He mentioned that the USD Reserve currently covers 21 months of dividends.

Revised Outlook for 2025 Amid Price Fluctuations

Along with the formation of the USD reserve, the company has revised its expectations for FY2025 earnings based on recent declines in Bitcoin trading prices.

If Bitcoin’s price falls within the range of $85,000 to $110,000 by the end of 2025, the company anticipates operating income could experience a loss of $7.0 billion or a profit of $9.5 billion, with potential net income ranging from a loss of $5.5 billion to a gain of $6.3 billion.

The diluted earnings per share are forecasted to be between a loss of $17.0 and earnings of $19.0 per share. These projections hinge on the successful completion of planned capital raises that would enable the company to meet its 2025 Bitcoin Yield Target and reinvest the proceeds for additional Bitcoin purchases.

Updated Bitcoin Performance Indicators for 2025

In light of the anticipated stock issuance to maintain the USD Reserve, the company now estimates that its Bitcoin yield for 2025 will fall between 22.0% and 26.0%. They also project Bitcoin dollar gains will be between $8.4 billion and $12.8 billion.

The company intends to achieve these targets through a blend of preferred stock offerings, disciplined equity issuances, and continual Bitcoin accumulation.

Market Reactions and Criticism

The announcement triggered immediate and strong reactions from market analysts, including prominent Bitcoin critic Peter Schiff. He expressed his views on X, labeling the establishment of a USD Reserve by the company as "the beginning of the end of $MSTR."

Schiff contended that the company was "forced to sell stock not to buy Bitcoin, but to buy U.S. dollars" to fulfill interest and dividend obligations, criticizing the business model as “broken” and asserting that the reliance on equity sales undermines its financial sustainability.